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Is a debt consolidation loan the perfect debt solution for me? As we are in a recession (according to the Ernst & Young ITEM Club Autumn forecast), it’s important that people with debt problems understand what is different between debt consolidation and the other available debt solutions - and understand which one could be right for them during a time like this.

To start, it hangs on what happens in the future. In a recession, it’s more likely than usual to be not very good news - when consumer spending becomes low and companies make a loss, many firms will resort to redundancies just so they can stop the firm going under. For any person who has got an idea their company is thinking about making some staff redundant, debt consolidation might not be the best idea.

Why? One of debt consolidation’s top advantages is the ability to lower the monthly amount a person pays in debt repayments. Debt consolidation has a bigger impact when the individual is in a fairly stable financial situation: when they know how much they’re earning and how much they’re spending each month, they can figure out the number one way of paying back their debt.

So an individual facing the possibility of unemployment might be better off looking into managing their debts, instead of debt consolidation. Debt management offers a flexible approach to debt: borrowers are allowed to ask debt management experts to get in contact with their creditors on their behalf, asking them to think about accepting lower monthly payments, remove charges and/or freeze interest.

IVAs require a high level of commitment and can require people with their own homes to release some of the money in their house. Borrowers must be able to commit to making fixed monthly payments for (often) six years, based on the maximum they can afford when they’ve taken their essential expenses into account. Even so, an IVA (Individual Voluntary Arrangement) is able to make all the difference - for individuals whose debts have slowly become out of control, as well as people faced with a severe drop in income. Of course, IVAs do require a level of financial stability: if the individual does not feel they could commit to five years of regular payments, an IVA (Individual Voluntary Arrangement) might not be the best debt solution for them.

Debt Help Resources:
CCCS
Think Money
Freeman Jones